How do people take profits?

[munchiedude]

don't misunderstand me, they're both as important as each other - and of course emotions are a contributory factor, but as an exercise try the following:

* Pick your exit, then decide where is the best entry (first, give yourself longs and shorts, ut then specify)

* Enter with unlimited stop, but try to pick your exit

too many times people think that a good entry and sound money management is all they need - and put down all failures to poor entries, rather than average entries but dreadful exits. But often I have found that people will look for a profitable entry, and then optimise their exit, rather than the reverse, or - heaven forbid - an aggregation of the two...

could you elaborate on your exercise? not following

 

[bedsit]

record noted i totally agree cos i think the emotion of greed has a powerful association with the exit whereas the entry is geneally emotionless

Agree with you about the importance of greed. From my experience when a trade is in a profit I lose touch with reality (greed makes me postpone the exit), so sometimes I exit too late and turn a nice profit into a small profit, break even and sometimes into a loss. To avoid this sort of behaviour, it is good to have an idea beforehand where one should exit from a profitable trade.

PS Good to know where to exit from a losing trade as well - maybe more important

 

[MachTrader]

All Trade exits should be determined before you enter the trade. Anything other than that is guessing/gambling.

Everyone needs to have a comprehensive position management strategy. I use a .02 step parabolic sar on a 5 min chart to determine my exits. Have something concrete like a plan or at least a limit order along with your stop.

 

[munchiedude]

totally agree bedsit, ive had the same issues that you mention there and hence i post this thread so as to discuss possible ideas surrounding exits. naturally there is no hard fast rule and every trader is different but for exits when in situations of profit, i would say one could either already decide the exit before the trade is placed, i.e. set a target price as a pending order but by doing this a trader could forsake further profits if the trade continues ahead, so im working on a number of ideas that could either eliminate the emotions of greed in the trade.

tbh, by cancelling and replacing in a normal gradual trending market i dont look for a manual exit, i simply look to be stopped out after i have locked in profit using the technique. however, the problem arises when sharp movements in the favoured direction doesnt create any pullback to cancel and replace...it then becomes a guessing game. one thing to counter that could be the use of fibs extensions to negate this or being disciplined with the R/R.

 

[munchiedude]

All Trade exits should be determined before you enter the trade. Anything other than that is guessing/gambling.

Everyone needs to have a comprehensive position management strategy. I use a .02 step parabolic sar on a 5 min chart to determine my exits. Have something concrete like a plan or at least a limit order along with your stop.

good to know what you do machtrader, i have to look into the SAR a bit more. does it act as a good indicator for reversals in a shrply trending market?

 

[FarQuinnell]

could you elaborate on your exercise? not following

Sure, there are lots of different exercises you can do to help you with your exits;

1) Decide in advance where you want to close your trade. Then, by the time that you are there, you should have chosen an entry - this is the natural process of a defined entry, unspecified exit, but in reverse. As you practice, you can go on to say that your position must be long or short, remembering that a dollar saved is a dollar earned.

2) Put yourself in a random position - flip a coin, whatever, and then try to pick your exit such that you don't leave more that 2 ATR (or whatever) on the table. your sucess is measured by how near you called the exit, rather than by how much you called the entry.

HTH

 

[Jason101]

Ok, I’ve got ya, I would call that trailing your stop below the last swing low. (Same thing different terminology.)

In my experience everyone does that so it gets hit often. I like to trail it the last but one swing low. It costs me more but gets hit less often.

 

[pipsurfer56]

The best way is to just keep moving your stop to the last swing. In the chart below I would move my stop to the top of each red bar each time a new one is formed.

 

[Jason101]

The other thing I like to do is to exit 2 parts at a target and trail the 3rd, when the pressure for profit has gone.

(this is turning into a good thread (kiss of death))

 

[FarQuinnell]

The best way is to just keep moving your stop to the last swing. In the chart below I would move my stop to the top of each red bar each time a new one is formed.

the problem with that is that the 1/50 times it works doensn't make up for the other 49 - same with the OP's swing high/low stop strategy. You can have an excellent entry, but stupid placement of stops makes you cannon fodder for the rest of us :/

 

[munchiedude]

the problem with that is that the 1/50 times it works doensn't make up for the other 49 - same with the OP's swing high/low stop strategy. You can have an excellent entry, but stupid placement of stops makes you cannon fodder for the rest of us :/

i think that entry is not the issue requiring ideas here, the stop and replace technique is merely a trade management technique used to let profits run whilst simultaneously reducing the loss on the trade as it develops. at the point when the stops are being amended to a higher low (if long) you will already be in the trade.

the original issue faced was to do with exits after a sharp movement and recognising or any methods to recognise when a sharp movement has run out of steam?

 

[Jason101]

hi,

ive been trading live for very small profits and i believe my risk and trade management are ok. however, i always encounter a stumbling block that i was wondering if anyone has any thoughts on?

situation: you find yourself in a winning trade, the forex pair then sharply moves in your direction. when do you take profits? what do you use to indicator a reversal from a sharp move your way?

i would normally use a cancel and replace stop management for normal trending markets, but when i trade trendline breaks, and the move is sharp, i never know where to cancel and replace to lock in profits since it hasnt retraced to any sup/res level.

i hope that it is clear, just wanted to know what people generally do in this scenario to maximise profits as often i have found myself seeing the sharp move retrace sharply back and eventually my winnings go "puff".

any thoughts appreciated.

If you go down in time frame all sharp moves should have somewhare to trail. If it is then to to small a move to be worth while trailing that may be a different matter.

 

[munchiedude]

If you go down in time frame all sharp moves should have somewhare to trail. If it is then to to small a move to be worth while trailing that may be a different matter.

thats a very good idea, i will apply that in tomorrow's sessions.

thanks!

 

[enragedcow]

i like my 20 pips rule as a day trader, after 20 pips, close the trade

if another entry signal shows re-enter

 

[FarQuinnell]

i think that entry is not the issue requiring ideas here, the stop and replace technique is merely a trade management technique used to let profits run whilst simultaneously reducing the loss on the trade as it develops. at the point when the stops are being amended to a higher low (if long) you will already be in the trade.

the original issue faced was to do with exits after a sharp movement and recognising or any methods to recognise when a sharp movement has run out of steam?

No mate, that is actually the whole point. If the market can see where your stop is, it doesn't matter where your entry was - expect to get some pain. If you put your stop right next to a neon flashing light that says "here is my stop" , as it would be behind a swing low/high, then you have to expect it to be taken out.

The HH/HL thing is great in forums, and in books, but pretty unreliable to trade. Unless the sh!t is hitting the fan, you should try fading into these HH's / HL's (and reverse), because that's where all the stops are likely to be.

 

[FarQuinnell]

i like my 20 pips rule as a day trader, after 20 pips, close the trade

if another entry signal shows re-enter

I like to close my trades after the third time the bloke from "homes under the hammer" does a piece to camera. That way, nobody knows where my stops is.

P.S DOH!

 

[Jason101]

FQ, - Thats why I like my stop trailed last but one swing low, then if its hit, it is normally the right time to get out for me.

 

[Jason101]

Or even 3x on longer time frame trades.

 

[FarQuinnell]

FQ, - Thats why I like my stop trailed last but one swing low, then if its hit, it is normally the right time to get out for me.

good for you mate; I'm the guy gunning for the 1st...

 

[eegozi]

I commonly use multiple time frames to identify a setup to get in. I use the LOWEST time frame's EMA 13 and EMA 39 cross to get out. If I have had a parabolic move like the recent action in gold I tighten it to a EMA 5 and EMA 13 cross. Works exceptionally well for me.

Here is a double long gold ETN that I bought when I had a weekly, daily, and 60 min buy signal. You can see that as the move started it was normal 30-45 degree angle to the uptrend. The 13,39 EMA cross never triggered a sell. As the move accelerated and became more parabolic I tightened the stop to the 5,13 EMA cross and sold at 70.20 on 8-22-11. Even if you had used the 13,39 EMA cross you still would have taken the meat out of the trend.

This was my biggest trade of the year.